Econ 102 CH2

Refer to the figure. In the figure above, the allocatively efficient output of gasoline is

• 2 million gallons of gasoline per month.

Refer to the table. The table lists six points on the production possibilities frontier for grain and cars. Given this information, which of the following combinations is unattainable?

• 4 tons of grain and 26 cars

Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can produce 36 sandwiches or 27 pizzas. Both individuals have linear (straight line PPFS). The concept of comparative advantage concludes that

• Beth should produce pizza and Joc should produce sandwiches

Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A

• has a lower opportunity cost of producing good X than has B.

A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid

• if the United States is producing at a point inside its production possibilities frontier.

Refer to the figure. The opportunity cost of producing a unit of consumption at point b in the figure point a.

• is less than at

As we move along a PPF, the opportunity cost of producing an additional unit of each good increases because

• not all resources are equally productive in all activities.

Refer to the figure. Which one of the following statements is true?

• point a is inefficient.

The opportunity cost of economic growth is

• present consumption that a nation gives up to accumulate capital.

A country that has an absolute advantage in producing all goods will

• produce all goods at lowest opportunity cost.

The production possibilities frontier is the boundary between

• those combinations of goods and services that can be produced and those that cannot.

Resource use is allocatively efficient

• when marginal benefit equals marginal cost.

The table lists six points on the production possibilities frontier for wheels and trucks. What is the opportunity cost of producing the 2nd wheel?

.4 trucks

Bill and Arthur live on a desert island. With a day's labor, Arthur can produce 4 fish or 4 coconuts; Bill can produce 6 fish or 2 coconuts. Both individuals have linear (straight line) PPFs. Consider the following potential terms of trade. Only one of these would be acceptable and mutually beneficial to both Bill and Arthur. Which one?

1 coconut trades for 2 fish

Refer to the table. In the table above, the marginal benefit of the 3 millionth television set is

1.5 computer per television set

Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is

1/2 pizza.

Betty and Ann live on a desert island. With a day's labor, Ann can produce 6 fish or 4 coconuts; Betty can produce 3 fish or 1 coconut. Betty's opportunity cost of producing 1 fish is and she should specialize in the production of

1/3 coconut per fish; fish

All of the resources in the economy of Dell are equally good at producing computers as they are at producing monitors. If Dell uses all of its resources to produce computers, it can produce 30 of them. Alternatively, if it uses all of its resources to produce monitors, it can produce 6 of them. [Hint: sketch the PPF!] The marginal benefit (MB, measured in computers) for each monitor is given in the following table: If Dell uses its resources so as to achieve allocative etficiency, how many monitors will it produce

3 monitors

Refer to the figure. In the figure above, an economy would grow fastest if it produces at point

A

The marginal benefit from a good is the amount a person is willing to pay for

one more unit of the good.